1. The audit report was recently expanded from the previous six paragraph format.The new format includes a section on key audit matters.This was an attempt to narrow the expectations gap.Discuss the expectations gap and whether you think the new audit report is likely to have any significant effect.

2. NRM Industries Limited (NRM) is a large family-owned, import-export business. NRM was founded in 1972 by three brothers named Virk, who used the initials of their first names. Now, control is about to be passed from the brothers to their children, seven of whom work directly for NRM. Another three children work for companies with whom NRM does business. One, Virk Logistics, manages the warehouses and deliveries for NRM. The Board of Directors is composed of the three brothers plus all ten of their children.

As part of estate planning, each brother owns a different company that owns their shares of NRM. When they formed the company, they each took one common share. Later, they reorganized. Each brother traded their one share for 10,000 new shares. Now they are about to reorganize again and go public. Their plan is to trade each10,000 shares for 10,000,000 shares and issue another 20,000,000 shares to the public.

NRM has never had an audit. Jasmine Virk, CFO, has approached your audit firm, Rowlands, Marcellin and Khan (RMK) to make an audit prior to issuing a prospectus. Jasmine went to college with one of your partners. Sales in 2020 for NRM are approximately $130 million.

Briefly discuss five elements to consider in your engagement planning.